Fees on UMA

Kicking off a broader discussion about fees on UMA following on from the discussion on yesterday’s community call.

At the moment there are final fees (paid on settlement and liquidations) and regular fees (used to keep CoC>PoC).

When a collateral type UMIP is passed, the final fee is set as approx $400 expressed in the collateral currency, this is taken at settlement from the token sponsors. This has a few issues

Market volatility can cause final fees to become wildly off. In the case of a dip, a too low final fee can risk the DVM being spammed for voting rewards, in the case of rise, a too high final fee can mean that liquidators are unhappy about utilising such a high amount of capital. Final fees are reviewed and updated manually. The choice of $400 is somewhat arbitrary as it is the token price in relation to the UMA price which is critical rather than its absolute dollar amount.

There is also no functionality for contract deployers to introduce fees for using their product in the UMA contract templates, this makes them somewhat reliant on UMA’s incentive structure or additional wrappers they add to charge fees for product use. The possibility of deployers introducing fees would allow them more independence.